1st Quarter Results

Vivo Energy plc First Quarter 2018 Results

A good start to the year

Vivo Energy plc ("Vivo Energy" or the "Company") announces interim consolidated financial results for the quarter ended 31 March 2018, following the admission of its shares to trading on the Main Market for listed securities of the London Stock Exchange, and to listing and trading as a secondary inward listing on the Main Board of the securities exchange operated by the Johannesburg Stock Exchange (together, "Admission") on 10 May 2018 (the "IPO"). References in this announcement to "Vivo Energy" or the "Group" mean the Company and Vivo Energy Holding B.V. ("VEH", the holding company of the Vivo Energy group until Admission), together with its consolidated subsidiaries and subsidiary undertakings. Refer to the Non-GAAP financial measures definitions of Adjusted EBITDA and Adjusted Net Income and reconciliations to the most comparable IFRS measures in the interim consolidated financial statements for the three month period ended 31 March 2018 (Note 4). The Group defines Gross Cash Profit as Gross profit adjusted to exclude depreciation and amortisation expense.

KEY PERFORMANCE INDICATORS

Christian Chammas, CEO of Vivo Energy, commented: "We have made a good start to 2018, reflected in a strong set of results across our operations. Performance was underpinned by continued growth in volume and gross cash profit, as well as our relentless focus on enhancing our customer value proposition across all segments, whilst driving efficiency throughout the business."

Highlights

OVERVIEW OF OPERATIONS BY SEGMENT

Retail

Retail volume growth was 7%, as a result of continued network expansion across the business, whilst maintaining average throughput performance for the retail network in line with full year 2017 levels. Overall Gross Cash Profit was up 10%, supported by enhanced volumes, incremental unit margin growth, as well as the ongoing expansion of Non-Fuel Retail activities.

Commercial

Commercial volume growth was 2% and Gross Cash Profit was up 7%. Gross Cash Profit increased across all parts of the Commercial segment, especially in Aviation and Marine, where several new tenders were won. Overall, 74% of volumes were generated by core Commercial customers in the B2B, Mining and LPG channels, which contributed 86% of Commercial Gross Cash Profit, with the remainder driven by Aviation and Marine.

Lubricants

Lubricants volumes were up 3% but Gross Cash Profit was down 10%. Consistent volume growth in the Retail and B2C channels was offset by lower Gross Cash Unit Margins due to increasing base oil market prices during the quarter. Overall, the Retail and B2C channels accounted for approximately 60% of volume and Gross Cash Profit within Lubricants.

FY 2018 OUTLOOK

During the first quarter of 2018, the Company progressed steadily towards meeting the Group's objectives for the year. Looking ahead, we continue to expect annual volume growth to be within our target mid-single digit percentage range, with an overall broadly stable total Gross Cash Unit Margin.

Vivo Energy expects to provide further updates on its medium term objectives, including the impact of the Engen transaction, in due course after completion of the transaction.

NOTE

The following interim consolidated financial statements were prepared in connection with the offering of the Notes. The Company does not intend to publish quarterly financial statements on an ongoing basis.

Ends

Enquiries:

Media

Tulchan Communications LLP

+44 20 7353 4200

Martin Robinson, Tony Bates

[email protected]

Vivo Energy

Rob Foyle

+44 1234 904 037

[email protected]

Investors

[email protected]

Notes to editors:

Vivo Energy operates and markets its products in countries across North, West, East and Southern Africa. The Group has a network of over 1,800 service stations in 15 countries and exports lubricants to a number of other African countries. Its retail offering includes fuels, lubricants, card services, shops and other non-fuel services (e.g. oil change and car wash). It provides fuels, lubricants and liquefied petroleum gas (LPG) to business customers across a range of sectors including marine, mining, construction, power, transport, and manufacturing. Jet fuel is sold to customers at 23 airports under the Vitol Aviation brand.

The Company employs around 2,360 people and has access to approximately 943,000 cubic metres of fuel storage capacity. The Group's joint venture, Shell and Vivo Lubricants B.V., sources, blends, packages and supplies Shell-branded lubricants and has blending capacity per annum of around 158,000 metric tonnes at plants in six countries (Ghana, Guinea, Ivory Coast, Kenya, Morocco, and Tunisia).

This announcement is available on the Company's website: http://investors.vivoenergy.com

This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Vivo Energy plc or any of its affiliates in any jurisdiction or an inducement to enter into investment activity.

Forward looking-statements

This announcement includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned", "anticipates" or "targets" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the future results of operations, financial condition, prospects, growth, strategies of the Group and the industry in which it operates.

No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements.

Such forward-looking statements contained in this report speak only as of the date of this report. The Company and the Directors expressly disclaim any obligation or undertaking to update these forward-looking statements contained in the document to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law.

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

2. Significant changes in the current and future reporting period

3. Financial instruments by category

4. Segment reporting

5. Other income and expense

6. Finance income and expense

7. Income taxes

8. Earnings per share

9. Other assets

10. Inventories

11. Borrowings

12. Other liabilities

13. Net change in operating assets and liabilities and other adjustments

14. Commitments and contingencies

15. Management Equity Plan

16. Events after balance sheet period

Terms and abbreviations

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

The notes are an integral part of these interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

The notes are an integral part of these interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

The notes are an integral part of these interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

The notes are an integral part of these interim consolidated financial statements.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The Company's condensed interim consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting Standards' as adopted by the European Union. The condensed interim consolidated financial statements have been prepared under the historical cost convention unless otherwise indicated.

These interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2017, which have been prepared in accordance with IFRS as adopted by the European Union.

2. Significant changes in the current and future reporting period

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2018.

IFRS 2 'Amendments to Classification and Measurement of Share-based Payment Transactions' clarifies the following:

· In estimating the fair value of cash-settled share-based payments, the accounting for the effects of vesting and non-vesting conditions should follow the same approach as for equity-settled share-based payments;

· Where tax law or regulation require an entity to withhold a specified number of equity instruments equal to the monetary value of the employees tax obligation, which is then remitted to the tax authority, such an arrangement should be classified as equity-settled in its entirety, provided it would have been classified as equity-settled in absence of the net settlement feature; and

· A modification of share-based payment that changes the transaction from cash-settled to equity-settled should be accounted for as (1) a derecognition of the original liability; (2) recognition of an equity-settled share based payment at the modification date; and (3) any differences between the carrying amount of the liability at the modification date and the amount recognised in equity should be recognised in profit or loss.

The Group already applies these amendments.

IFRS 10 'Consolidated Financial Statements' and IAS 28 'Amendments to Sale or Contribution of Assets between an Investor and its Associate or Joint Venture' deals with situations where there is a sale or contribution of assets between an investor and its associate or joint venture and the treatment of gains or losses from such transactions. The IASB has not confirmed the effective date of this amendment, however early application is permitted. The Group does not anticipate that the application of these amendments will have an impact on the Group's financial statements in future periods should such transaction arise.

IFRIC 22 'Foreign Currency Transactions and Advance Consideration' addresses how to determine the 'date of transaction' for the purpose of determining the exchange rate to use on initial recognition of an asset, expense or income, when consideration for that item has been paid or received in advance in a foreign currency which resulted in the recognition of a non-monetary asset or non-monetary liability.

The Group already accounts for transactions involving the payment or receipt of advance consideration in a foreign currency that is consistent with IFRIC 22 amendments.

IFRIC 23 'Uncertainty over Income Tax Treatments' provides additional guidance on the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. The Group has to determine the impact, if any, on the consolidated financial statements.

The Group does not anticipate that the application of these amendments will have an impact on the Group's consolidated financial statements.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

3. Financial instruments by category

The table below sets out the Group's classification of each class of financial assets and financial liabilities and their fair values for the current and the comparative period:

The Group has classified equity investments as financial instruments at FVTOCI (without recycling). These investments are measured using inputs for the asset or liability that are in absence of observable market data, based on net asset value of the related investments (level 3 in the IFRS 13 fair value measurement hierarchy). Since the value is based on the net asset value of the related investments, no sensitivity analysis is presented.

4. Segment reporting

The Group operates under three reportable segments: Retail, Commercial and Lubricants.

Retail segment - Retail Fuel is aggregated with Non-Fuel revenue. Both the operating segments derive revenue from retail customers who visit our retail sites. Retail Fuel and Non-Fuel revenues are aggregated as the segments are managed as one unit and have similar customers. The economic indicators that have been addressed in determining that the aggregated segments have similar economic characteristics, are that they have similar expected future financial performance and similar operating and competitive risks.

Commercial segment - Commercial Fuel and LPG are aggregated in the Commercial segment as the operating segments derive revenues from commercial customers. The segments have similar economic characteristics. The economic indicators that have been addressed are the long-term growth and average long-term gross margin percentage.

Lubricants segment - Retail Lubes, B2C Lubes and B2B/Export Lubes are the remaining operating segments. Since these operating segments meet the majority of aggregation criteria they are aggregated in the Lubricants segment.

The segmented information is prepared using the same accounting policies as those described in the annual consolidated financial statements for the fiscal year ended 31 December 2017.

The following table presents revenues and profit information regarding the Group's operating segments.

The amount of revenues from external customers by location of the customers is shown in the table below.

Reconciliation of Non-GAAP measures

We believe that providing certain non-GAAP financial measures in addition to IFRS measures provides users of our consolidated financial statements with enhanced understanding of results and related trends and increases the transparency and clarity of the core results of our business. Non-GAAP financial measures are derived from the consolidated financial statements but do not have standardised meanings prescribed by IFRS. The exclusion of certain items from non-GAAP performance measures does not imply that these items are necessarily non-recurring. From time to time, we may exclude additional items if we believe doing so would result in a more transparent and comparable disclosure.

Gross cash profit, the Group defines Gross cash profit as Gross profit adjusted to exclude depreciation and amortisation expense. Adjusted EBITDA, the Group defines EBITDA as earnings before tax, finance expense, finance income, depreciation and amortisation. Adjusted EBITDA is arrived at by making further adjustments to EBITDA for special items. Special items represent income or charges that are not considered to represent the underlying operational performance and based on their significance in size or nature are presented separately to provide further understanding of the financial performance of the Group. Headline earnings, the Group defined Headline earnings as earnings based on profit attributable to owners of the Group before items of a capital nature, net of income tax.

5. Other income and expense

6. Finance income and expense

7. Income taxes

Income tax expense is recognised based on management's estimate of the effective annual income tax rate of 36% (2017: 38%) expected for the full financial year. The effective tax rate used for the three-month period ended 31 March 2018 is in line with management's estimated annual income tax rate for the year, due to the fact that management has not identified any significant items impacting the effective annual income tax rate.

8. Earnings per share

Basic and diluted EPS were computed as follows:

9. Other assets

10. Inventories

Cost of sales as disclosed on the face of the consolidated statements of comprehensive income include the total expense for inventory during the quarter for $1,567m (full year 2017: $5,869m). The carrying value of inventory represents the net realisable value.

Write-downs of inventories to the net realisable value amounted to $5m as per 31 March 2018 (2017: $5m). These were recognised as an expense during the period and included in cost of sales.

11. Borrowings

Current borrowings consist of bank borrowings which carry interest rates between 1% and 24% per annum.

The carrying amounts of the Group's non-current and current borrowings approximate the fair value.

The Societe Generale secured term loan facility was entered into on 6 June 2017. The facility matures on 9 June 2022 and has semi-annual repayments. Interest is paid quarterly at a rate of Libor plus a margin of 2.50% per annum. Incremental facility was drawn down on 18 December 2017 and carries an interest of Libor +2.5% for the amortised portion and Libor +3% for the bullet portion.

The facility carries the following security: Pledge of the shares of Vivo Energy Investments B.V., Vivo Energy Cape Verde Holdings B.V., Vivo Energy Morocco Holdings B.V., Vivo Energy Mauritius Holdings B.V., Vivo Energy Mali Holdings B.V., Vivo Energy Senegal Holdings Ltd., Vivo Energy Madagascar Holdings Ltd., Vivo Energy Tunisia Holdings Ltd., Vivo Energy Africa Holdings Ltd., Vivo Energy Kenya Holdings B.V., Vivo Energy Burkina Faso Holdings B.V., Vivo Energy Guinea Holdings B.V., Vivo Energy Cote D'Ivoire Holdings B.V., Vivo Energy Ghana Holdings B.V. and Vivo Energy Uganda Holdings B.V.

Key covenants:

· The Company needs to supply to the lender within 150 calendar days after year end its audited annual consolidated financial statements, unaudited annual non-consolidated financial statements and the unaudited annual group accounts of each operating unit. Within 90 days after each half of each financial year the Company should provide its unaudited non-consolidated financial statements, unaudited consolidated financial statements and unaudited group accounts for each operating unit for the financial half year.

· With each set of financial statements a financial covenants compliance certificate has to be provided showing the following covenants ratios: debt cover and interest cover.

· Formerly, we reported twice a year, a set of financial statements accompanying a financial covenants compliance certificate that had to be provided showing the following covenants ratios:

- Current cover ratio;

- Debt cover;

- Debt service cover; and

- Cash flow cover.

· The loan carries a negative pledge that restricts the Company from creating or permitting to subsist any security over any of its assets. The Company is also not permitted to incur any additional financial indebtedness, enter into mergers, demergers or reconstruction, may not sell, lease, transfer or dispose of assets or issue any guarantees subject, in each case, to certain exemptions.

· Default events include but are not limited to a breach in financial covenants, cross-default, failure of payment, misrepresentations, insolvency, failure to pay taxes and unlawfulness.

· Upon the occurrence of change of control, the facility will be cancelled and all outstanding loans, together with accrued interest and all other amounts due, will become immediately payable and due. The IPO reorganization of the Group does not lead to any change of control.

No covenants were breached in the last applicable period ended 31 December 2017. The Company amended its senior facility after the balance sheet period. For details see note 16.

12. Other liabilities

13. Net change in operating assets and liabilities and other adjustments

14. Commitments and contingencies

Lease commitments

The table below analyses the Group's lease liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Contingencies

The Company's Executive Management has prepared a best estimate of its contingent liabilities that should be recognised in respect of legal claims in the course of ordinary business. Some of the claims will be compensated by an indemnity obtained from the former Shareholder (Shell); should these cases be determined against the relevant Vivo Energy Entity, such entity will be indemnified by the former Shareholder. An indemnification assets of $8m (2017: $10m), equivalent to the fair value of the contingencies provided for by the Group in respect of the indemnified claims that have been recognised.

In many markets there is a high degree of complexity involved in the local tax regimes. In common with other business operating in this environment the Group is required to exercise judgement in the assessment of any potential exposures in these areas. Where appropriate the Group will make provisions or disclose contingencies in accordance with the relevant accounting principles.

15. Management Equity Plan

In 2012, Vivo Energy Holding granted to certain senior managers and other senior employees' phantom options which entitled option holders to a cash payment based on the value of Vivo Energy Holding shares upon exercise of their phantom options. Under the terms of the phantom options, all outstanding phantom options would become fully exercisable upon admission.

However, the option holders have agreed to amend the terms of their outstanding phantom options such that 30% of the outstanding phantom options became deemed to be exercised at admission and 70% will become exercisable on the first anniversary of admission for a period of 12 months. Under the amended terms, the option holders' entitlement to the cash payment is based on the market value of the shares at the time of exercise net of a nominal per share exercise price.

The Management Equity Plan related liability as at 31 March 2018 amounts to $44m (31 December 2017: $49m). 

16. Events after balance sheet period

On 4 December 2017, the Company agreed to enter into a sale and purchase agreement with Engen Holdings (Pty) Limited (Engen Holdings), a 100% subsidiary of Engen Limited, in relation to the purchase of shares in Engen International Holdings (Mauritius) Limited (Engen International Holdings) for the exchange of a shareholding in Vivo Energy, with a possible cash element. This transaction is subject to regulatory approval.

In May 2018 the Company became listed on the London Stock Exchange Main Market for listed securities and the Main Board of the JSE Limited by way of secondary inward listing. In connection with this, a pre-IPO reorganisation of the Group was executed including the insertion of Vivo Energy plc, a public company limited by shares incorporated in the United Kingdom, as the ultimate parent company via a share-for-share exchange effective on 4 May 2018.

The Company amended its senior finance facility agreement before the listing to include a new multi-currency Revolving Credit Facility (RCF), consisting of a primary $300m able to be drawn upon on admission and an additional $100m contingent upon events after the listing. Under the terms of the new agreement, the financial covenants and the clauses on change in control and additional indebtedness disclosed in note 11 are amended to align with the Company's future capital structuring plans.

The Company is planning to issue senior unsecured notes in June. The contemplated notional amount is $400m and the maturity will be 5 to 7 years. The proceeds of the notes will be used to repay the existing term loan in full. The Company has sought credit rating from two rating agencies for the purpose of the notes issuance. Notes holders and RCF lenders will rank pari passu.